When I set the transparency = x it'll make the entire window transparent which includes the text, borders, images, etc. Of course, I only wanted the background of the window to be transparent but don't know how. I've tried setting the frame_color = #ff00ff00 to have opaque alpha but that didn't work either. I'm using Arch, bspwm and compton. Current config.

Here's a nice desktop of what I want to achieve.
Oh, this issue fell through the cracks sorry!
This is not currently possible with the current features, I guess this falls under the category of implementing RGBA support which has been a long open issue (#289)
We may be able to solve this. I'm wondering why I haven't answered this yet. I thought I answered it already.
Actually I'd like to dump the opacity setting, too. I'd like to shift this to RGBA values. But I had a failed attempt in #344. In there, I used rgba values, but I instructed cairo to draw over our own drawn surface instead of incorporating the lower window's surface.
In between the PR and now, over 1.5 years passed and I found cairo_operator_t. Maybe in combination with a call to cairo_set_operator, we could handle this and finally have RGBA values.
@tsipinakis Do you have any knowledge if this correct, what I'm telling here? If it's really the case how I outlined it, it should be super easy actually. And I wonder why it hasn't been implemented yet.
For now, if you're using compton you can just add "90:class_g = 'Dunst'" to your opacity-rule section. This will make the notifications 90% transparent.
There's an overall opacity option in dunst itself. Same effect, but no speciql compositor needed. But this doesn't cover the font (which is this bug's actual feature request).
Implemented with #717, now all color strings support transparency.
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Implemented with #717, now all color strings support transparency.